AI in Trading: Human Ingenuity on Steroids

One of the key benefits of the use of artificial intelligence (AI) tools for trading is that it can massively enhance human capabilities, explains Andrej Rusakov, CEO of Data Capital Management.

“The way I see it is that AI can really put human ingenuity on steroids,” he says. “What I mean by that is that it really allows you to take way more data points into account and find structures in data sources that are impossible for the human eye to spot.”

Rather than displacing humans, Rusakov explains that this technology is most effective when it is deployed in tandem with a human understanding of how markets work. When building strategies, his firm uses this understanding of markets and then codifies and enhances them by using AI, and in particular machine learning, tools to find new patterns in different data sets.

Using AI tools is also very effective, he argues, because it relies on completely non-biased, factual-based discovery based entirely on data.

As Rusakov puts it: “I do think that machine learning and technology in general are much better in finance than relying on arguments like: ‘This looks like the crisis in Japan in 1990. But why? Because there are two data points that are similar.’ Well machine learning is doing exactly the same, but it’s just looking at a whole new dimension of data points and it doesn’t forget, so it’s putting human intuition into how the market works, or used to work, into code and that is also very helpful.”

However, he does add one very important caveat: “You have to be very careful when you’re building these models. They’re orchestrated by humans, you have to basically hold hands, otherwise there is a very high risk you’ll end up in false discovery, in finding spurious correlations or over-fitting your models.”

Elsewhere in the interview, Rusakov talks about how to use AI tools to effectively generate alpha, the challenges associated with finding relevant and accurate data amongst all the white noise in the market, and tries to dispel some myths regarding AI in trading.